State and local governments will have to face the fiscal music in putting together stimulus-free budgets next year. Signals that elected officials around the state are sending these days about their fiscal situations range from cautionary to grim.

In Annapolis, the governor and state lawmakers face a baseline general fund structural deficit that is projected to widen from $1.6 billion in FY 2012 to $1.9 billion in FY 2013, according to the state’s Department of Legislative Services.

That could serve as the backdrop for some very difficult General Assembly sessions in the next two years, when the governor and lawmakers will not have the benefit of billions in federal stimulus funding that came the state’s way for FY 2010 and FY 2011.

Last week, Governor Martin O’Malley unilaterally offered state workers a $15,000 buyout and $200 for each year of service if they agree to quit their jobs by the end of January. As composer Andrew Lloyd Webber once famously quoted, “That’s not a good sign.”

Signs of fiscal distress are also surfacing in Maryland’s counties and towns.

Montgomery County faces a more than $300 million budget deficit for fiscal 2012. County leaders have been prompted to consider an array of budget cutting options that, among other things, could include decreasing pay for county employees and increasing employee contributions to medical plan premiums.

In Baltimore County, newly-elected County Executive Kevin Kamenetz began his term by announcing plans to cut 143 county government positions and to consolidate four departments to realize a combined savings of $8 million.

In Frederick, city officials are mulling how to deal with more than $120 million in planned projects and debt, including $80 million in state-mandated upgrades to the city’s water, without raising fees in a recession.

On the Eastern Shore, Wicomico County faces a crumbling road infrastructure at a time when the state has reduced its local aid for the county’s roads from $7 million to $200,000. “These are challenging times for Wicomico,” County Executive Rick Pollitt said as he was sworn in for his second term last week. “The time has come to grasp the reins of government with vigor,” he said. “The hand-wringing and moaning and groaning about how bad things are must come to an end.”

Pollitt makes a good point worth dwelling on.

For the last two years, many elected leaders have instinctively adopted an “if we can only just get to the end of the recession” approach to fiscal management. They’ve deployed billions in federal stimulus dollars and transferred millions from a variety of state and local funds to close operating budget gaps while watching hopefully for signs that the recession is waning.

The assumption appeared to be that once the recession is over, revenue to Maryland governments will return to something approaching pre-recession levels. It may happen eventually, but it’s becoming more evident that it won’t be anytime soon.

It seems clear that this recession will ultimately test the capacity among state and local elected leaders for strategic planning.

More than anything else, what’s needed at both the state and county levels at this point in our history is strategy – not a continuing milieu of short-term tactics. A strategic approach must focus on outcomes, not process. And job creation and economic growth must be the top-priority outcomes. The recession has taught us a tough lesson that all else – from quality of life to generating sustainable government revenues – derives from job creation and economic growth.

Without private-sector business growth, the government’s ability to deliver the initiatives and services that many citizens have come to rely on is severely hampered.

How would a strategic approach translate into state and local budgets? Two significant things come to mind. First, it would require government leaders to meticulously assess the value of all government activities and to assign priorities directly relating to a well-conceived strategic plan. Also, it would force lawmakers to fully distinguish the difference between funding operational programs and investing government resources in ways that directly nurture economic growth over the long-term.

Let’s hope that this is the year that elected leaders in Annapolis and elsewhere begin to resist their instinctual tendencies to skip over strategy and go directly to tactics.

Wicomico County Executive Rick Pollitt has it right. In Maryland, it really is the time to “grasp the reins of government with vigor.” I respectfully suggest that it be strategic – not tactical – vigor.

Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.

Donald C. Fry has been the president and CEO of the Greater Baltimore Committee (GBC), the central Maryland region's most prominent organization of business and civic leaders, since November 2002.

Under Don’s leadership, the GBC is recognized as a knowledgeable and highly credible business voice in the Baltimore region, Annapolis and Washington, D.C. on policy issues and competitive challenges facing Maryland. Its mission is to apply private-sector leadership to strengthening the business climate and quality of life in the region and state.

Fry served as GBC executive vice president from 1999 to 2002. From 1980 to 1999 Fry was engaged in a private law practice in Harford County. During this time he also served in the Maryland General Assembly. He is one of only a handful of legislators to have served on each of the major budget committees of the General Assembly.

Serving in the Senate of Maryland from 1997 to 1998, Fry was a member of the Budget and Taxation Committee. As a member of the House of Delegates from 1991 to 1997 Fry served on the Ways and Means Committee and on the Appropriations Committee.

Fry is a 1979 graduate of the University of Baltimore School of Law. He earned a B.S. in political science from Frostburg State College.